Orange and Mercury One-2-One are to be pursued by the Commission after failing to give satisfactory replies to its 8 August warning letter calling on phone operators, service providers and handset manufacturers to stop using ‘SIMLocks’ to tie mobile phone subscribers into restrictive contracts.

The Spanish mobile phone market will also be examined further, but no specific firms have yet been named by officials.

The Commission’s August warning letter demanded that the mobile industry spell out to subscribers the possibility of ‘unlocking’ their handsets to enable them to switch to a rival company.

It added that if the handset was offered at a cut price together with the service, subscribers should be free to transfer once the subsidy was paid off.

The decision to target the British mobile market for further action comes as little surprise. Consumer complaints have been rife in a country where handsets are available for a few ecu, frequently as part of a package which includes a restrictive contract. Spanish practices have also sparked a large number of complaints from many unhappy mobile phone subscribers.

The Commission believes agreements between mobile phone manufacturers and operators to make ‘SIMLock’ handsets which only work with a single operator distort competition and are therefore illegal.

At the time of the initial warning letter from Competition Commissioner Karel van Miert, Orange said it was not aware of any change in its procedures or fresh instructions to service providers to give British subscribers a new deal.

The UK’s Consumers Association warned that the mobile industry was in “an horrific situation” and was in danger of gaining the same untrustworthy reputation in the Nineties that time-share selling earned in the Eighties.

Meanwhile, the Directorate-General for telecommunications (DGXIII) seems to be distancing itself from the idea of getting mobile operators to sign up to a voluntary Europe-wide code of conduct. Some officials suggest that immediate consumer worries could instead be taken up by Commissioner Emma Bonino’s Directorate-General for consumer affairs (DGXXIV).

The idea of a code of conduct has been cold-shouldered by network operators who say they are covered by licence terms, and by service providers. The pitfalls of a voluntary code were also highlighted by a report drawn up for DGXIII by consultants Ovum Ltd and Intercai GmbH.

A progress report on the proposed code of conduct will be presented to telecommunications ministers at a meeting in February. Originally, DGXIII envisaged that the code would only cover the relationship between network operators and service providers, but it later snowballed to include wider consumer issues.

Passing responsibility for handling consumer complaints to Bonino’s services and waiting for a clearer picture of what rules may be necessary for service providers now appears to be the route preferred by Commission officials.